Fashion retailer Next has become the latest company to say it could make its customers foot the bill for higher wages following the introduction of the National Living Wage.

It followed Costa-owner Whitbread's warning that it too may be forced to raise prices to cover the cost of better pay.

Next said it might have to raise prices by just 1 per cent in total by 2020 due to the changes, as it posted a 7.1 per cent rise in pre-tax profits for the first half of the year to £347.1million, up from £324.2million a year earlier.

Price hikes: Next will have to pay its staff more from April and said it could pass the cost on to shoppers

Next said of a total expected 6 per cent rise in prices to fund additional wages costs between 2016 and 2020, 1 per cent would come from the cost of covering the National Living Wage and its knock-on effects on other staff wages.

The remaining 5 per cent would come from general wage inflation, estimated at 4.5 per cent a year.

Next’s adult starter hourly rate is currently £6.70, meaning that the cost of implementing the living wage would be £2million for next year but could rise to a total of £27million a year, the group said.

Only £11million of that cost will go towards ensuring all staff are paid the minimum level, with £16million used to maintain pay differentials between members of staff.

In contrast, general wage inflation is forecast to cost £120million over the four-year period.

Following changes introduced by Chancellor George Osborne during the last Budget, all employers will be required to pay staff over 25 years-old at least £7.20 an hour from next April, rising to £9.00 an hour by 2020.

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The retail juggernaut also maintained its sales and profit guidance for the full year, despite a disappointing summer for many of its high street rivals.

Investors reacted positively to the news, with Next shares on the FTSE 100 index rising 2 per cent in morning trading, up 90p to 7,765p.

Next said it might need to raise prices by 1 per cent over four years to compensate for the increase in wage costs but that it was ‘unlikely to have a material effect on the trading performance of the business’.

‘It should be noted that this is probably a pessimistic view of the required price rise, as we have assumed no improvements in productivity,’ Next added.

‘In reality, we hope to be able to compensate for some wage inflation through increased productivity measures throughout the business.’

Next's caution comes as this week Costa Coffee and Premier Inn owner Whitbread also warned it might have to ramp up its prices over the next year in order to pay for the government's new living wage.

Next, which employs about 50,000 people across the UK, also reported a 2.7 per cent rise in sales to £1.9billion, with store sales 0.2 per cent higher and Next Directory sales up by 8.2 per cent in the first half.

The retailer said it expected full price sales for the full year to increase between 3.5 per cent and 6 per cent, in line with previous guidance.

Ian Forrest, investment research analyst at The Share Centre, said: ‘Sales and profit guidance for the full year were unchanged and the company expects better sales in the second half partly due to weaker comparative figures from last year.

‘Today’s news shows Next continues to perform well and will have reassured investors that the impact of the new higher minimum wage should not be significant for the company.’

He added: ‘We continue to recommend Next as a “hold” for medium risk investors seeking a balance of growth and income.’

Freddie George, analyst at broker Cantor Fitzgerald, said it was encouraging that the company left its guidance for sales and profits unchanged.

‘We retain our BUY recommendation and reinstate our TP at £80 from being under review,’ he said.

And Nick Bubb, an independent retail analyst said: ‘Today’s interims from Next look fine and there is no change in full-year sales and profit guidance, with Next still relying on soft autumn comps to kick in, but there is a surprisingly big focus in the statement on Wage Costs and the impact of the new National Living Wage and a surprising decision to focus on increasing Directory debtors rather than return more surplus cash to shareholders!’